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Energy
Size
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Market Cap £16.55bn
Enterprise Value £29.85bn
Revenue £12.72bn
Position in Universe 26th / 2677

FOCUS-Canada's oil patch cuts back climate efforts under pandemic

Sun 14th June, 2020 6:00am
By Rod Nickel and Jeff Lewis
    WINNIPEG, Manitoba/TORONTO, June 14 (Reuters) - Canadian oil
sands companies have shelved nearly C$2 billion in green
initiatives in a cost-cutting drive to weather the coronavirus
pandemic, a reversal in some of their commitments to reduce
emissions and clean up their dirty-oil image.
    International oil firms left Canada in droves in recent
years due to the high costs to turn a profit in the sector. Some
investors and banks, meanwhile, halted financing in part to
pressure the world's fourth-largest crude producer to reduce the
environmental impact of oil-sands production. 
    This year, top producers Suncor Energy  SU.TO , Canadian
Natural Resources  CNQ.TO  and Cenovus Energy  CVE.TO  have cut
a combined C$1.8 billion ($1.32 billion) in planned spending on
green initiatives as losses mount due to economic lockdowns that
have hammered oil demand. 
    "This has strengthened our view on the matter, that our
decision that we took (to block oil sands) was correct," said
Jeanett Bergan, KLP's head of responsible investments.
    KLP, Norway's largest pension fund, exited oil sands
investments last year, while the country's $1 trillion wealth
fund in May blacklisted Suncor and other large producers for
producing excessive greenhouse gas emissions.  urn:newsml:reuters.com:*:nL4N2CV14K 
    The Canadian industry has the highest upstream emissions
intensity among major world oil and gas producers, at 39
kilograms per barrel of oil equivalent, more than triple that of
the United States, consultancy Rystad Energy said in May.
    The picture in Canada contrasts with Europe, where the
biggest oil and gas companies have diverted a larger share of
their cash to green energy, even through the outbreak.
 urn:newsml:reuters.com:*:nL1N2D00J7
    The oil sands industry is more carbon-intensive than other
forms of crude production, and faces more intense pressure from
investors to limit emissions. Canadian oil producers will have a
harder time convincing investors and environmentalists of their
role in a future lower carbon economy if their commitment to
green initiatives is wavering.
    Canada's oil firms have invested in recent years to reduce
their emissions intensity. But Western Canada's overall
emissions increased 14% from 2005 to 2018, as oil output
doubled.

    INVESTMENT CUTS
    Suncor, which made most of the cuts, shelved a C$300 million
wind power project and a C$1.4-billion cogeneration plan, which
would replace coke-fired boilers with natural gas units at its
base operations, reducing carbon emissions and other pollutants.
    Suncor vice president of sustainability Jon Mitchell said it
and other green investments hinge on the financial health of the
company's core business extracting crude. 
    "The deferral and delay in some of those projects does not
diminish their importance," he said.
    Cenovus, which is targeting net zero emissions by 2050, cut
its technology budget by 78%, or C$137.5 million, saying in a
filing it was only advancing select initiatives that had both
cost and environmental benefits. The budget included work on
green initiatives such as solvent-aided extraction and a new
design for oil sands facilities.
    A spokeswoman said Cenovus's commitment to green targets had
not changed.
    Canadian Natural put off a C$46 million pilot project that
would reduce emissions by extracting bitumen at the mine face,
limiting the need for trucks and equipment, the company said. A
spokeswoman said that while the company has deferred some
projects, its commitment to environmental targets remains.
    Filings show that Suncor, Cenovus and Imperial Oil  IMO.TO  
 most recently budgeted roughly C$1.2 billion combined on
research and development annually, which includes green
initiatives, aside from capital projects. 
    Suncor, Canadian Natural and Imperial declined to say how
much of those budgets have been cut this year. MEG Energy
 MEG.TO  did not respond.  
    Alberta, heart of most of Canada's production, reduced
environmental monitoring requirements temporarily, saying it was
necessary to comply with health orders regarding the pandemic.
The suspended types of monitoring included certain water quality
tests and some monitoring of soil and wildlife. 
    Alberta's move is worrisome, said Jamie Bonham, director of
corporate engagement at NEI Investments, a firm focused on
responsible investing, which holds stakes in the sector to
advocate for green improvements.
    "The province is simultaneously opening up the economy – you
can go to a barber, get a massage or sit in a restaurant - but
you can’t take an environmental reading at a wellsite?" Bonham
said.
    The pause is only for "short-term relief," said Kavi Bal,
spokesman for the province's energy minister. He noted that a
major commercial carbon capture project began operations this
month.
    The federal government has used pandemic aid to launch two
new green initiatives - cleaning up abandoned wells and loans to
help companies reduce methane emissions.
    Such steps, however, are too little and too late to draw
back many investors, banks and insurers that shunned the
industry in recent years, according to a Reuters survey.
    Eight investors, banks and insurance companies reached by
Reuters, including Royal Bank of Scotland and France's AXA, that
publicly reduced their oil sands involvement in recent years
over climate change said industry efforts to reduce
environmental impacts did not change their opposition to the
sector.
    While Canada has set a target of net-zero emissions by 2050,
it has not outlined a plan. "Right now we do not have one,"
Natural Resources Minister Seamus O'Regan said in May on a
panel.
    
($1 = 1.3585 Canadian dollars)

 (Reporting by Rod Nickel in Winnipeg, Manitoba and Jeff Lewis
in Toronto; additional reporting by Victoria Klesty in Oslo
Editing by Marguerita Choy)
 ((rod.nickel@tr.com; Twitter: @RodNickel_Rtrs;
1-204-230-6043;))
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